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Magazines Archives - 2008 July
Cost-conscious US consumers head for discount stores during tough times
Story 6 - News Feature
WITH THE US ECONOMY BATTERED BY THE REAL-ESTATE CRISIS AND SOARING OIL PRICES, RETAILERS ARE BEARING THE BRUNT OF AMERICAN CONSUMERS TURNING CAUTIOUS IN THEIR SPENDING. BUT NOT ALL IS LOST. BOB VEEREN FINDS OUT THAT SOME
OPERATORS ARE GAINING FROM A DOWN MARKET. WHAT CAN THEY TEACH THEIR ASIAN COUNTERPARTS?
US retailers appear to be facing a dismal 2008 as gas prices near or exceed US$4 a gallon, and with the US$130-abarrel oil fuelling inflationary food and other price increases. For many consumers, budgets are so tight that there is little left over for discretionary purchases such as clothing,
big home-improvement projects and new furniture.
Add to this a depressed housing market where home prices keep declining at double-digit rates, and even consumers with the money to spend are beginning to think they should cut back on unnecessary expenditures. Complicating the budgetary pressures facing many Americans is the fact that some areas of the US are over-stored as chains continue to build hundreds of outlets year after year, even despite only slight population increases.
Belatedly, some chains like Home Depot, Lowes, Liz Claiborne and Ann Taylor are closing
down stores or curtailing their ambitious opening plans. But, in too many cases, the damage has been done and there are more stores than needed in many markets.
 
Particularly hurt are department stores such as Sears, Dillard and Macy that rely heavily on fashion appeal, apparel and home furnishings. Too many of their product offerings are discretionary
and, with budgets tight, consumers are putting off purchasing.
Fashion-retail chain Dillard, for example, reported profits went down 94% for the first quarter this year, with samestore sales dipping 6%. Earnings this year were US$0.04 a share, down from
US$0.53 last year, with an expected profit of US$0.21 a share. The company operates 324 Dillard stores and seven clearance centres in 29 states.
Bon Ton, another department-store chain, saw sales slip 5.2% to US$700 million for the quarter, and losses increasing to US$2.02 per share, from US$1.78.
American Eagle Outfitters, a sportsoriented chain, recorded sales of US$640 million for the first quarter, up 4.6%, but earnings fell to US$0.21 a share from US$0.35.
Apparel chain Ann Taylor reported income plunged nearly 18% for the first quarter, with same-store sales down by a frightening 11.5%. In contrast, Loft, a division selling less expensive clothing,
edged up 0.7%. Its overall sales were up 2% but only due to a number of additional stores, which opened last year. Suit seller Mens Wearhouse also saw sales slide 1% to US$491 million.
Its profits tumbled to US$0.19 a share from US$0.75.
Sears Holdings, owner of once-largest US retailer Sears and the Kmart discount chain, suffered a first-quarter loss from poorer sales at both chains. It lost US$56 million or US$0.43 a share, compared with an expected profit of US$0.15 a share. Sales dropped 6% to US$11.1 billion, with comp-store sales down 9.8% at Sears units and 7.1% at Kmart units or 8.6% throughout the company.
However, some retailers are thriving in these tougher times. First-quarter results for many retailers
showed consumers bypassing department stores and most speciality and apparel stores, and heading for discount and dollar stores, warehouse clubs and other chains that would save them money.
To read other stories, get a copy of Retail Asia's July 2008 issue. To subscribe, please download the subscription form from http://www.retailasiaonline.com/subscription.html
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